Here’s your emerging markets cheat sheet

Bloomberg

As emerging markets from Argentina to Turkey to South Africa tumble, Neil Shearing at Capital Economics is stressing that investors shouldn’t lump them all together. These countries, he says, are no longer as homogenous as they were even just a decade ago.

Here’s how he breaks them down into five groups (though the labels come from MarketWatch):

Serial bad boys, or countries where what he calls “serial mismanagement by the authorities” is now a risk to economic stability. Poster children include Argentina, Ukraine and Venezuela. On Friday, stocks in Argentina slid amid fears of a financial crisis there following a devaluation of the currency and the easing of restrictions on dollar purchases.

The spendthrifts. These countries have been living beyond their means and are most vulnerable to the end of easy-money policies by the Fed and other central banks. Take a bow, Turkey, South Africa, Chile, Peru and parts of South East Asia.

Oh my aching head: These are countries that he says still have a hangover from the last boom. These are mainly in Emerging Europe, Capital Economics says. Hungary and Romania stand out. As a group, the risk is that the euro zone’s financial problems could flare up again and spill eastward.

Homeboys, or countries with domestic structural problems. This is the biggest group and begins with the BRICs – Brazil, Russia, India and China. The story there is more domestic, rather than what happens in Europe or with the Fed. Worries about a slowdown in Chinese growth after a surprise contraction in factory output there kicked off the latest emerging-market selloff. Also read: Craig Stephen on the pain is beginning in China.

The strivers. The outlook is brightening in these good-news countries. Hello, Korea, which will benefit from better economic conditions in key export markets. There’s the Philippines, which should see the benefit of economic reforms, and Mexico (a two-fer).

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